The World Trade Organisation (WTO) is a multilateral organisation that regulates and promotes international trade. The functioning o WTO is on a “rule-based order”. Among others, the two primary functions of WTO are to serve as a negotiation platform and to provide a method for resolving disputes. It is a crucial topic in the Economy syllabus for the UPSC Examination. The article below briefs the other functions of WTO in detail followed by crystal clear explanations.

What is the World Trade Organisation (WTO)?

• The World Trade Organization (WTO) is the only international organisation that deals with trade law.
• At its core are the World Trade Organization (WTO) Accords, which have been negotiated and ratified by the majority of the world's trading states and are recognised by their parliaments.
• The headquarters of the World Trade Organization is in Geneva, Switzerland.
• The Ministerial Conference, which meets twice a year and is made up of all member states, is the organization's highest decision-making body.
• There are 164 countries that make up the World Trade Organization (WTO) (160 UN countries, EU, Hong Kong, Macau and Taiwan).

Functioning of WTO

The WTO's main function is to make trade flow more smoothly, freely, and reliably. It accomplishes this by the following

Administers trade agreements

• The World Trade Organization (WTO) agreements cover products, services, and intellectual property.
• They require governments to make their trade policies open by alerting the WTO about laws in place and actions enacted, as well as reporting on nations' trade policies on a regular basis by the secretariat.

Acts as a forum for trade negotiations

• The World Trade Organization (WTO) aids international trade discussions by providing a framework for structuring agreements and offering dispute resolution methods.
• It establishes an international legal framework to ensure that commodities and services are freely exchanged between member countries.

Settles trade disputes

• When there is a trade dispute between its member states, the WTO also operates as a dispute resolution body.
• Members of the World Trade Organization (WTO) can file complaints against other WTO members if they believe a country's trade and economic policies are in violation of one of the WTO's agreements.
• Following the complaint, formal hearings are held in the style of a courtroom until a resolution is achieved.

Reviews national trade policies

• This is accomplished in the WTO in two ways:
  • governments must notify the WTO and fellow members of specific actions, policies, or laws through regular "notifications,"
  • The WTO performs regular trade policy reviews of individual countries.

Builds the trade capacity of developing economies

• The World Trade Organization (WTO) administers special initiatives to assist poor nations in improving their capacity to engage in free trade with more developed countries.
• Low-development countries are also given benefits under some accords to help them transition to free trade with other countries.

Cooperation with other international organizations

• As a result, the WTO Secretariat collaborates with a wide range of international and regional organizations on issues of mutual concern.
• Participating as an observer at meetings of other groups, working on technical support, and consulting on other matters as needed are all examples of this cooperation.

Other Functions of WTO

• lower living costs and raise living standards;
• resolve disputes and reduce trade tensions:
• boost economic growth and employment;
• lower the cost of doing business internationally;
• promote good governance;
• assist developing countries;
• empower the weak;
• support the environment and health;
• contribute to peace and stability;
• be effective without making the news

Significance

• The WTO's global system uses negotiation to eliminate trade obstacles and upholds the concept of non-discrimination.
• Production costs are lower (because of decreased import costs) and final goods and services prices are lower, resulting in a lower cost of living.

Conclusion

The World Trade Organization (WTO) thus provides a single platform for member countries to negotiate trade agreements and handle trade disputes. It is in charge of 60 worldwide trade agreements and roughly 300 regional trade agreements. The status of international law has been granted to 60 trade agreements via WTO.

FAQs

MCQs

1. What is the primary purpose of the World Trade Organization (WTO)?

A) To regulate domestic trade
B) To facilitate international trade
C) To conduct international relations
D) To provide military support

2. Which body is the highest decision-making authority in the WTO?

A) General Council
B) Ministerial Conference
C) Dispute Settlement Body
D) Secretariat

3. What role does the General Council play in the WTO?

A) Conducts trade negotiations
B) Resolves disputes
C) Oversees day-to-day operations
D) Organizes ministerial meetings

4. Which of the following is NOT a function of the WTO?

A) Trade negotiations
B) Economic sanctions
C) Dispute resolution
D) Monitoring trade policies

5. How does the WTO assist developing countries?

A) By imposing trade restrictions
B) By providing technical assistance and capacity building
C) By conducting military training
D) By facilitating arms trade

GS Mains Questions and Model Answers

Q1: Analyze the significance of the World Trade Organization in the context of global trade.

Answer: The World Trade Organization (WTO) plays a vital role in facilitating global trade by establishing a structured framework for international trade agreements. It promotes trade liberalization by reducing tariffs and other trade barriers, thereby enhancing market access for member countries. The WTO also provides a platform for trade negotiations, enabling countries to resolve conflicts through dialogue rather than unilateral actions. Its dispute resolution mechanism ensures that trade rules are respected, promoting stability and predictability in international trade. Additionally, the WTO supports developing countries by offering technical assistance and capacity-building programs, helping them to integrate into the global trading system effectively. Overall, the WTO is essential for fostering a fair and equitable trading environment that benefits nations globally.

Q2: Discuss the challenges faced by the WTO in the current global trading environment.

Answer: The WTO faces several challenges in the current global trading environment, including rising protectionism and trade tensions among major economies. The increasing trend of unilateral trade measures undermines the multilateral trading system that the WTO advocates. Additionally, the organization struggles with negotiating new trade agreements due to differing national interests, leading to stagnation in the Doha Development Round. Furthermore, the rapid pace of technological advancements and the rise of digital trade have outpaced existing WTO rules, necessitating updates to accommodate e-commerce and digital services. Lastly, there is growing criticism of the WTO's decision-making processes, which some perceive as favoring developed countries over developing nations. Addressing these challenges requires reforms and a renewed commitment to multilateral cooperation among member states.

Q3: Evaluate how the WTO contributes to sustainable development through trade.

Answer: The WTO contributes to sustainable development by promoting trade policies that encourage economic growth while ensuring environmental protection and social equity. It recognizes the link between trade and sustainable development, advocating for the integration of environmental considerations into trade agreements. By facilitating trade in environmental goods and services, the WTO supports the transition to a green economy, allowing countries to share technologies and practices that mitigate climate change. Furthermore, the WTO's efforts to reduce trade barriers can enhance access to markets for sustainable products, fostering economic opportunities in developing countries. The organization also encourages the responsible management of natural resources, emphasizing the need for trade that benefits both people and the planet. Through these initiatives, the WTO plays a crucial role in advancing global sustainability goals and promoting inclusive trade practices.

Previous Year Questions on WTO

1. UPSC CSE Prelims 2021:

Question: Which of the following is NOT a function of the World Trade Organization (WTO)?

A) Administering trade agreements
B) Providing a forum for trade negotiations
C) Imposing economic sanctions
D) Settling trade disputes

Answer: (C)

Explanation: Imposing economic sanctions is not a function of the WTO; its primary roles include administering trade agreements, providing a forum for negotiations, and settling disputes.

2. UPSC CSE Mains 2019 (GS Paper 1):

Question: "Examine the role of WTO in promoting fair trade practices among member countries."

Answer: The WTO plays a crucial role in promoting fair trade practices by establishing a set of rules that all member countries must adhere to. It encourages transparency in trade policies and aims to eliminate discriminatory practices that could distort trade. Through its dispute resolution mechanism, the WTO ensures that member countries adhere to the agreed-upon trade rules, providing a platform for resolving conflicts amicably. By fostering cooperation and dialogue among nations, the WTO aims to create a more equitable trading environment that benefits both developed and developing countries, thus contributing to a balanced global economy.